Shareholder Sues Centene for Clarifying Management’s Role in Alleged Medicaid Fraud

Investor Centene is suing the nation’s largest managed health care insurer, Medicaid, seeking access to the company’s records to determine how much its executives were responsible for paying the $ 1.25 billion that the company expects to pay in a drug fraud settlement.

Shareholder Robert Garfield filed a lawsuit in Delaware Chancery Court on Tuesday. Shareholders are authorized by state law to inspect the internal books and records of the corporation. According to the complaint, the plaintiff seeks to establish whether the company executives have violated their fiduciary duties and whether they have committed offenses.

Based on the company’s reports, speeches and decisions that are publicly available, Garfield argues that “the board and management either knew or should have known that their haphazard approach to compliance facilitated and tolerated widespread fraud,” the lawsuit says.

Centene did not respond to an interview request.

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Centene disbursed a total of $ 214 million this year to Arkansas, Illinois, Mississippi and Ohio in Medicaid settlements.

On the same day Garfield filed the complaint, the Kansas attorney’s office announced that Centene would pay an additional $ 32.4 million for PBM’s operations. More than a dozen other states have hired the law firm Liston & Deas to investigate billing and refund practices for Medicaid Centene and other PBMs that states say bypass spread pricing bans.

The settlements will reduce Centene’s bottom line and jeopardize its ability to negotiate new Medicaid contracts, Garfield said. Fraud allegations also undermine the company’s reputation among politicians, taxpayers and investors, the complaint said.

In August, Garfield requested records pertaining to Centene’s compliance procedures. Centen denied him, according to the lawsuit.

In October, Garfield retried, demanding review of past board meeting minutes, company compliance policies, Medicaid billing receipts, and more. Both sides spoke later that month about Centene’s desire for Garfield to sign a confidentiality agreement before handing over hundreds of documents related to PBM’s operations, he says.

The next month, Centene submitted a proposed confidentiality agreement to Garfield. Garfield returned the contract with his own edits, which included removing a clause that prevented him from seeking additional legal action after reviewing the records. In response, Centene reinstated the language in a different version of the agreement, the complaint says.

To date, they have not agreed on the language of the confidentiality agreement, and according to the lawsuit, Centene has not provided any material related to Medicaid drug prices.

“The company’s prolonged delays in negotiating a desired confidentiality agreement are

testifies to an obstructionist approach, “the complaint says.

Garfield is seeking access to these records, legal fees and any other remedy the court deems to be impartial and fair.

Centene has 30 state Medicaid contracts and 14 million members. The company restructured its PBM in 2019 to only serve as a third-party administrator and is now looking for an external operator to manage its $ 300 billion in annual drug spending.

Last month, hedge fund Politan Capital Management acquired a stake in Centene for $ 900 million in an effort to shake up the management and operations of the company.

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